In line to achieve loan book growth of 25-30% in FY15: IIFL

Nirmal Jain, Chairman, IIFL Holdings in an interview to CNBC-TV18 spoke extensively about the third quarter performance.He said the fund based activity that comprises of mortgages, gold loans, loan against shares etc has been steadily growing and the loan book in Q3 grew by 7.5 percent, which is in line with target of growing 25-30 percent for FY15.It has been a good quarter for most of the businesses like wealth management, insurance distribution and capital market. The year-on-year (Y-o-Y) profit after tax went up 67 percent. If one compared the nine months of FY15 with that of FY17, then PAT was up 60 percent driven by fund based activities, said JainMoreover, the company’s assets under management (AUM) currently stand at Rs 67,500 cr, where the bank earns a fee income, said Jain.

The company reported a consolidated net profit of Rs 112.3 crore which was up 2.6 percent versus Rs 109.5 crore quarter-on-quarter (Q-o-Q) for the third quarter ended December 2014. The consolidated income from operations were up 3.4 percent at Rs 922.5 crore versus Rs 892.2 crore Q-o-Q.

Below is the transcript of Nirmal Jain's interview with Nigel D'Souza and Sumaira Abidi on CNBC-TV18.Nigel: Good traction been seen on your fund based activity, we have seen a growth of around 30 percent odd and even on a sequential basis, even on such a high basis, by close to around 6 percent odd, take us through that particular thing because that is where a bulk of your revenue is coming?A: Fund based activity comprises mortgages, gold loan, commercial vehicle loans and loan against shares and this business has been steadily growing. So in the quarter, our loan book grew by 7.5 percent and we securitize it a bit more. So the net on the balance sheet has grown by 6-6.5 percent. So this is in line with our target of growing anywhere between 25 percent and 30 percent the loan book and with advantage of operating leverage, profit can grow faster. So if you look at overall results, it is a good quarter because year-on-year (Y-o-Y) basis, post tax profit has gone up by 67 percent and if you look at nine months results, these nine months vis-à-vis last year’s nine months then post tax profit is up by 60 percent. Primarily, driven by fund based activities but this year even wealth management, our insurance distribution and capital market, all the businesses have been doing well and there has been positive traction in each of them.Sumaira: Can you take us through what has been the growth in your assets under management?A: We have Rs 67,500 crore of assets under our wealth management business. So these are the assets which are either under advised custody or management. We have a wealth management as a separate subsidiary company and that itself has reported post tax profit of about Rs 75 crore in the first nine months. So this is where we cater to HNIs and we advise them on asset allocation amongst all asset classes, primarily equity and fixed income and this is primarily advisory business and this is a wealth management business. This is where we have Rs 67,500 crore of assets under advise and management. Here we earn a fee income, which is on an average of around 60-70 bps per annum.Nigel: With regards to your products division business as well, that is a smaller part of your business only around Rs 140 crore but on the margin front and on the EBIT basis, at least it has been growing very well. So currently on an EBIT margin basis, it is at around 20 percent. Could you give us some clarity with regard to that?A: This comprises of wealth management as well as insurance distribution. So the life insurance distribution peaks out in the last quarter of the financial year because most of tax saving, as well as life insurance policies see concentration in the last quarter. Therefore this business also has picked up and it has tremendous potential. These are all financial services business. We have distribution of mutual fund, we have distribution of life insurance product and some other products also in our wealth management banner, mutual fund we have been the largest incremental mobiliser of mutual fund and we have seen that equity mutual funds have seen traction although in last three months or last six months we have seen the significant new investment coming from HNIs but we are seeing the retail investors also started moving in.If you look at 2014 market performance, people talk about FIIs but FIIs money what they have brought in the market is not significantly different from the year before but the key feature of this year has been net incremental assets with our local mutual funds. I think they have got more than Rs 6,000-7,000 crore of equity assets - I don’t have the latest data but they have been getting a significant amount of money in the equity mutual funds and of course we also have been mobilising some of that.Sumaira: As on the September-end quarter, your gross NPAs were just about touching that one percent mark, has there been any worsening, can you take us through what the latest numbers stand at?A: If you see our gross NPA number as on December end it is 1.1 percent, which is slightly up. So there are a few mortgage cases.  Real estate has been under stress for last two-three years but for almost all these cases we have adequate collateral. It is just that the borrower is not able to service the interest for three years six months, then they are classified as NPAs but this is a very small change and I think going forward in the next one-two quarters as the economy picks up, as the sentiment improves in various businesses - most of these borrowers are SME borrowers, they will come on track. I don’t see significant concern there and as I said that all these gross NPAs we are seeing, we had adequate collateral. Also, we provide significantly more than what Reserve Bank of India’s (RBI) statutory requirement is and our net NPAs are just at 0.4 percent.